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Which one to choose? Coverdell, Custodial, 529? |
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 The most important facts and things to consider :
• Consider if everyone in the house has the same opinion about plans for attending college.
• Start researching financial aid packages .
• Look at last year's tax return to see what your adjusted gross income was.
• Remember that the cost of a college education has continued to increase at rates well above the general inflation rate in recent years. But your options for setting aside college money in tax-efficient investment accounts have increased as well.
• 529 college savings plans let participants invest money in mutual funds or similar investment vehicles to be used for qualified undergraduate and graduate expenses at any accredited college or university.
• UGMA/UTMA custodial accounts may offer estate tax breaks to contributors, as well as income tax breaks.
• Coverdell Education Savings Accounts allow tax-free growth and withdrawals of earnings for qualified expenses, but contribution and income limits may restrict their effectiveness for some taxpayers.
• Unlike 529 plans, Coverdells allow tax- and penalty-free withdrawals for elementary and high school expenses, in addition to college expenses.
• Call your state Treasurer's office and ask whether special 529 plan benefits are available for in-state participants.
• Open the college account
• Choose investments for college accounts as you would for any other account
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